ORION Minerals has exercised an option to buy the copper resources held in the Okiep Copper Project (OCP) for R76.5m ahead of a 12-month, R7m exploration programme aimed at adding a second major copper-producing centre in South Africa’s Northern Cape.
As announced previously, the transaction will see the state-owned lender the Industrial Development Company taking a 43.7% stake in the companies owning the mineral rights. One critical change to earlier announcements, however, is that the mineral rights will be acquired directly by Orion rather than it buying the mineral right holding companies.
The sellers will be paid in cash to the tune of R18.4m and R58.1 million in Orion shares equal to the volume-weighted average price at transaction close. The selling parties also stand to receive a deferred payment or “agterskot” in relation to the JORC compliant tons published as a result of Orion’s exploration work on the mineral targets.
Orion said today that a proof of concept study found that OCP could be commissioned with low upfront capital – the company previously stated pre-production capital of A$58m (R624m) – accessing the orebody with open pit and underground mining processes. Production would begin about 16 months after construction had started.
Errol Smart, CEO of Orion Minerals said the transaction represented a significant boon for the region’s economic potential. “Our due diligence investigation has confirmed and exceeded our best-case expectations, clearly demonstrating that the OCP is an outstanding opportunity for Orion to establish a second major base metals production hub alongside our flagship Prieska Copper-Zinc Project,” he said.
Orion Minerals is currently waiting on lenders to approve the A$432m development of the Prieska Copper-Zinc Project which has been scoped for production of 20,000 tons of copper and 70,000 tons of zinc a year.
In addition to synergies that would exist with Prieska Copper-Zinc Project, OCP could yield significant tons of copper and turn Orion into a meaningful player in the metal. Newmont and the now extinct Gold Fields of South Africa, previous operators of Okiep Company Company, mined 30,000 to 40,000 tons of copper metal annually.
“Our objective is for future production from OCP, to supplement Prieska’s forecast production of 22,000 tons of copper and 70,000 tons of zinc, transforming Orion into a substantial base metal mining house with two operating hubs in Tier-1 mining districts in the Northern Cape,” said Smart.
Smart is bullish on the mineral prospects for the Northern Cape which has been under-explored using modern exploration techniques. In June, Orion Minerals signed a memorandum of understanding with the South African government in which the parties agreed to pool geological information with regard to greenfield minerals exploration in the Northern Cape.
In a statement last year that may be well recalled if Orion’s plans are a success, Smart said: “Geologically, I can tell you, having gone around the world and looked at terrains, the Northern Cape is an absolute dripping roast”.
Shares in Orion Minerals are 31% higher on a 12-month basis. The stock was just under three percent weaker in trade today.